November 2011 Retail Sales Eke Out A Gain

Includes: AAPL, AMZN, EOG, F, GM, SWC, XOM
by: Neal Razi

Time again for the best economic report of the month, the Retail Sales Report. This report gives you insight into both the state of the U.S. consumer spending, which accounts for over 70% of the U.S. economy, and various individual categories. The categories give a sort of "what's hot and what's not" that investors can use to help them make decisions on individual sectors or companies. I write a monthly blog on this report, complete with investing ideas, and since there is no sooner time than the present, let's get started.

The economy continues to recover and even expand slowly but steadily, with employment and even construction showing life lately. Amazingly, there hasn't been any self induced shocks for a few months from the increasingly dysfunctional U.S. government. The U.S. economy, for now, has also shrugged off the European Debt Crisis, and it is important to remember that Europe only accounts for about 3% of our GDP anyways. In an interesting turn of events, economists are now saying the U.S. is probably going to be one of the bigger drivers of the world economy over the short term, as Europe hits a recession and drags down Europe-tied China and other emerging markets with it.

For the month, Retails Sales advanced, but only a small +0.2%. While that number is only slightly positive, remember this is coming off two fairly large months of increases in a row, so it's not unexpected to see a slowing. Excluding the volatile and outsized autos category netted the same +0.2% increase. Let's take a look at the categories now to make sense of it all.

(Click to enlarge)

The big news this month is in Electronics, one of the poorer performing categories of the year up until last month, knock out another big increase at +2.1%, taking them to a very respectable +6.4% year on year. Investor Watch: It's all about Apple (NASDAQ:AAPL). The iPhone 4s is flying off the shelves. I recommended them last month, and do so again.

Next, look at non store retailers, up +1.5% for the month and a staggering +13.9% year on year. Christmas Sales online were up 15% over last year. Every month has seen a big gain from this category. Investor Watch: Amazon (NASDAQ:AMZN) should see some nice sales numbers and yet is testing its $180 support. If that holds, you could see some strong gains in the online retailer. Kindle Fire is reportedly hot.

Finally, motor vehicles races in with a +0.7% increase and a powerful +8.1% y/y, continuing to accelerate (pardon the car puns). I've been bullish on auto all year and the sales numbers are showing it. Don't underestimate the effect of both coiled demand combined with Fed induced low interest rates on auto sales, they have a long way to run still. Investor Watch: Ford (NYSE:F) just reinstated its dividend and despite being plagued by recalls is putting out good vehicles and is very cheap. GM (NYSE:GM) is even cheaper, and has even better vehicles in my opinion. Stillwater Mining (NYSE:SWC), despite the boneheaded acquisition of the year, has a license to print money out of palladium (used in Catalytic Converters). Their stock has improved 50% off its lows in October.

Gasoline sales retreat -0.1%, which always bodes well for the rest of Retail Sales. Gasoline is in an odd situation, as oil prices are back in the $100 range, but gasoline hasn't matched. Word is that refiners are getting more of the cheap stuff from the Bakken and that's keeping the gas prices down. I'll leave off investor recommendations again this month here, even though I like several cheap oil companies. Oil continues to rise, gas continues to fall, it's very odd. Several of the ones I recommended like EOG (NYSE:EOG) and Exxon (NYSE:XOM) have come off their lows to within 10% of their highs, so let's sit on our hands here for now.

Food drops this month to 0.2% which also bodes well for the rest of retail sales. Again here, let's see where it goes before doing any more investing, there might

be some deals coming up if food prices drop some more.

Miscellaneous retailers make up a big share of the disappointment -1.2%, and that's an odd category anyways. It's prone to the occasional spike up or down, but is a very hard category to figure out much from.

Finally, the biggest negative news of the month from a macro perspective is in restaurants coming in at -0.3%. It's still up a strong +6.1% year over year, so I wouldn't make too much of it at this point. Restaurants are a great leading indicator of consumer confidence, but it might very well be that most people have other things to do with their money this month, i.e. Christmas shopping. Let's hold off here too.

Overall, it's a bit of a mixed bag this month, and certainly could have been better, but it's far from a disappointment. Lower gas and food should mean higher everything else next month. Online retail and auto continue to ring up the gains and electronics is just plain on fire. There's a few buying opportunities but this is mostly a wait and see month based upon this report.

Disclosure: I am long XOM, GM.

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